Manappuram Finance Shares Rise 3% After Strong Q4 Results

Relief to Mannapuram Finance from Kerala High Court, stay on ED investigation for 2 weeks

Shares of Manappuram Finance Limited rose 3% in early trade after solid fourth-quarter results. Shares of Manappuram Finance were trading 2.23% higher at Rs 112.45 at 9:40 am on the NSE.

Manappuram Finance, on May 12, 2023, reported a 58% rise in consolidated net profit to Rs 413 crore for the quarter that ended March, compared to Rs 261 crore a year ago. The company’s board of directors has declared an interim dividend of Rs 0.75 per share at a face value of Rs 2.

Kerala-based NBFCs posted total revenue of Rs 1,771 crore, up 19% from Rs 1,481 crore in the same period last year. The company’s pre-tax profit from its gold lending business, which accounts for three-quarters of its total profit, rose 16% to Rs 422 crore. Meanwhile, its microfinance arm posted a pre-tax profit of Rs 144 crore, compared with a year earlier loss.

However, gold loan assets managed by Manappuram fell 2% year-on-year, as higher gold prices meant borrowers needed less collateral. Its gold loan customer portfolio grew by 0.4% year-on-year.

CLSA has a “buy” rating on Manappuram Finance with a target of Rs 140 per share. A weak Q4FY23, with profit after tax missing expectations by 5%, will drive share prices higher. The miss was driven entirely by a net interest margin (NII) of 8%. Management attributed this to the 6% quarter-on-quarter growth in Manappuram, driven by lower yields on gold loans due to longer loan maturities after two consecutive quarters of decline. Regarding the recent ED investigation, management stated that the High Court issued a stay order.

BofA has set a target of Rs 143 per share for Manappuram Finance. According to the company, earnings aligned with expectations for solid support in FY24, boosting non-gold profitability and growth. The high court stayed the ED’s executive order at a hearing on Friday, and the company is confident it can reverse it at an upcoming hearing, the company said.

Morgan Stanley has an “overweight” rating on Manappuram Finance with a target price of Rs 160 per share. The loan growth the company showed was a pleasant surprise. According to management, gold loan yields are lower due to the shift to longer-term loans, which should gradually recover. Asset quality and Asirvad’s results were strong, according to the brokerage.

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